Blanket Gold Mine Says Still on Track After Q1 Slowdown

HARARE-Toronto listed gold miner,
Caledonia Mining Corporation said on Tuesday it was on track to achieve its
annual targets of between 53 000 and 56 000 ounces at Blanket Mine in Zimbabwe,
after suffering an eight percent slowdown during the quarter ended March 31,
2019.

Output
retreated by 7,6 percent during the review period to 11 948 ounces, from 12 924
ounces during the prior comparable period in 2018, according to financial
results for the review period.

Chief
executive officer, Steve Curtis said output had surged in April, with volumes
in line with targets.

“We
maintain our full year production guidance of 53 000 to 56 000 ounces for 2019,”
Curtis said in a commentary on first quarter results.

“I am
pleased to report that production in April was almost exactly as planned and we
are confident that production will improve in the remainder of 2019. I look
forward to an improved cost performance in the remaining quarters of the year
as we anticipate that the beneficial effects of improved production will be
felt in the subsequent quarters of 2019. The early part of the quarter was made
more challenging by some significant macroeconomic disruptions. In particular,
the continuation of the currency peg between domestic currency and the US
dollar caused severe hardship to our employees in Zimbabwe due to their reduced
purchasing power which had repercussions for employee morale. The removal of
the currency peg in late February resulted in a devaluation of the local
currency and allowed management to take steps to remediate the situation of our
employees,” he said.

Subsequent
to the devaluation of the Zimbabwean currency in February, Caledonia reported a
“one-off positive financial impact on its results, with a foreign exchange gains
of $3,3 million arising on the revaluation of assets and liabilities, Curtis
said.

“Notwithstanding
the production difficulties experienced as a result of lower than expected
production tonnage, unreliable electricity supply and lower mine grade, cash
generation for the quarter was solid at $6,3 million – sufficient to support
both capital investment in the Central Shaft project of $5,1 million and
Caledonia’s regular quarterly dividend as well as maintain a healthy balance
sheet with net cash of $9,7 million at the end of March,” said Curtis.

Revenue
for the review period dropped to $15,9 million, from $18 million during the
comparable period in 2017.

But consolidated
operating profit before tax of $12,3 million for the quarter was 105 per cent
higher than Q1 2018 although this increase was entirely due to gains of $3,3
million and a profit on the sale of a subsidiary of $5,4 million.

Attributable
profit after tax was also substantially higher than the comparable quarter in
2018 at $9,3 million, again due to exceptional items which outweighed lower
gross profit.

Operating
cash flows for the quarter were $6,3 million, from $7 million in 2018.

“Company’s
balance sheet remains strong with net cash of $9,7 million as at 31 March 2019,”
said Curtis.

“Work
on sinking the Central Shaft remains on track. I expect shaft sinking to be
completed in the middle of this year after which a further 12 months will be
needed to equip the shaft before it is commissioned in mid-2020 and we can
begin to increase production to our target of 80 000 ounces per annum by 2022.
This production increase will contribute significantly to reducing operating
costs through economies of scale and we look forward to further increasing cash
flows and earnings as the shaft is commissioned,” said Curtis.